External reserves continue increase, hit N26.5bn – Punch

Oyetunji Abioye

The country’s external reserves rose to $26.55bn on January 9, from $26.2bn on January 6, the latest data from the Central Bank of Nigeria showed on Tuesday.

The foreign exchange reserves had hit $26bn on January 3, 2017, up from $25.8bn on December 30, 2017, the CBN statistics revealed.

The reserves ended last year with $25.84bn balance on December 30, 2016.

The foreign exchange reserves have been rising in recent weeks following the gradual increase in oil price and production output.

Within the space of about six and half weeks, the reserves have appreciated by $2bn. It went up from $24.5bn on November 24, 2016 to $26.5bn on January 9, 2017.

The foreign exchange reserves had risen to over four-month high of $25.7bn on December 28, up from $25.4bn on December 23.

In less than one week, the reserves rose by almost $300m from $25.084bn on December 16, 2016 to $25.361 on December 22.

However, currency and economic experts are not sure if the tiny upticks in the external reserves’ level are sustainable amid a falling naira and acute shortage of dollar in the foreign exchange markets and the economy.

Despite the staggering crash in the value of the naira against the United States dollar and other major foreign currencies last year, the CBN spent $4bn from the nation’s external reserves to defend the local currency in 12 months.

On December 22, 2015, the reserves stood $29.341bn. On December 22, 2016, the foreign exchange reserves stood at $25.361bn. This means that the external reserves were depleted by $4bn in 12 months.

The drop is estimated at 14 per cent. On December 31, 2015, the last day of the year, the external reserves stood at $29.069bn, compared to $25.84bn recorded on December 30, 2016.

The controversial defence of the naira by the CBN has come under severe criticism by economists, who believe that the forces of demand and supply should be allowed to determine the exchange rate of the naira, at least to a considerable level.

A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said a fall in oil prices would add pressure on external reserves and fuel more pressure on the naira.

However, an analyst at EY, Mr. Bisi Sanda, said there were indications that oil price and output would rise further this year.

The country’s reserves had recorded $23.89bn low on October 19.  The reserves dropped by 15.9 per cent between 2015 and 2016.

Foreign reserve lost $5.5bn in Q2, 2016 – CBN – Vanguard

By By Emeka Anaeto, Economy Editor

Latest figures from the Central Bank of Nigeria, CBN, shows that the country’s external reserve has lost a total of USD5.5 billion this year, up to last weekend, with September figures showing a third quarter loss of USD1.9 billion, significantly higher than USD1.5 billion lost in the preceding quarter (second quarter 2016), despitee higher exchange rates. The external reserve which mirrors a nation’s financial health in respect of foreign trade, opened this year at USD30 billion but closed last weekend at about USD24.5 billion, barely enough to cover three months import bill, the international reserve adequacy border line.

The latest figure indicates a Year-to-Date, YtD, depreciation of -22.4 per cent. The second quarter figures had shown a YtD depreciation of 18.3 per cent. The first quarter of this year had recorded the fastest decline in reserve, dipping by USD2.1 billion, but the second quarter showed a considerable slow down at USD1.5 billion before a renewed increase in the pace of decline.

Financial analysts had attributed the development to lower export earnings from crude oil coming against huge demand for foreign exchange at the official interbank foreign exchange market. This situation, according to them, couples with lack of foreign exchange inflow from foreign investors and other independent sources.

The development has also put pressures on the exchange rate at both the official interbank and more in the parallel market segment, forcing a massive depreciation of Naira in both markets throughout the third quarter of 2016. As at last weekend, Naira remained pressured as a result of illiquidity in virtually all segments of the foreign exchange market as the Naira/Dollar exchange rate at the parallel market crashed to an all-time low of N490.00/US$1.00 on Friday, compared to N440.00/US$1.00 on Monday, and N310/ US$1.00 at the beginning of the quarter. A foreign exchange dealer in one of the commercial banks reacting to this development, told Vanguard:   “The apex bank’s attempt to centralize the inflow of foreign exchange to official channels, continues to constrain supply of foreign exchange to the markets. “There has not been strong response in terms of foreign exchange inflow from foreign investors to the CBN’s new foreign exchange regime, which had aligned with the wishes of investors.”

The apex bank’s restriction on free trade in foreign exchange by unauthorized persons came with a directive suspending unregistered International Money Transfer Organisations, while threatening to sanction individuals operating as international money transfer agents. However, the exchange rate at the interbank has remained broadly stable as a result of frequent interventions by the CBN. The Naira/Dollar spot rate opened last week at N308.50/US$1.00 on Monday but depreciated to N312.99/US$1.00 by midweek. In the futures market, investors continue to take advantage of the Over-the-counter, OTC, foreign exchange Futures contract to hedge exposures to the Nigerian market in a bid to limit currency movement risk.

Accordingly, the total value of open OTC FX Futures contracts rose by US$614.1 million month-on-month at the end of September. Also, the apex bank issued US$1.0 billion of the September 20, 2017 instrument at N243.50/US$1.00 to replace the September 28, 2016 instrument which matured last week. While lamenting the reserves crises last week, Minister of Budget and National Planning, Sen. Udoma Udo Udoma, said Nigeria had revenue and foreign currency concentration problems, adding that diversification was the only solution. Foreign exchange dealers feared that  with the  unresolved  scarcity of dollar, there might be further fall  of the foreign reserves  in subsequent months, just as the apex  bank said it would maintain  its  weekly  step–up interventions aimed at  shoring up the ailing Naira.

Falling reserves cast doubt over CBN’s naira defence –

There are growing doubts over Central Bank of Nigeria’s (CBN) ability to defend the naira following the steady decline in the country’s foreign exchange reserves.

CBN data shows that the reserves stood at $25.8 billion on August 16, the lowest since 2005 and down from almost $50 billion in 2013.

They now equate to less than six months of imports, which undermines the apex bank’s ability to defend the naira, according to analysts at Rand Merchant Bank.

The naira reached a record low of N365.25 against the dollar on Thursday, its worst decline on the interbank forex market since the new flexible exchange rate policy commenced.

Indeed, forex dealers point out that but for the CBN’s interventions almost on a daily basis to boost liquidity in the market via dollar sales, the naira would have fared much worse against the dollar.

Market analysts attribute poor liquidity in the market and the attendant weakness of the naira to the continued reluctance of foreign investors to return to the country despite several measures introduced by the CBN to lure them back.

In addition to liberalising the forex market, the regulator has hiked interest rates from 12 per cent to 14 per cent and it has been offering treasury bills at high rates to attract offshore flows into the country.

As a forex trader put it: “The Central Bank is trying to drive the economy with bills and bonds; they are offering securities at such high yields.”

Also, in a move it said will help narrow the wide gap between the official and parallel market rates as well as boost dollar liquidity, the CBN last month told international money transfer operators to pay dollar proceeds from customer transfers into local commercial banks in naira, while selling the dollars themselves to Bureaux de Change (BDC) outlets.

A few days ago, the banking watchdog pegged the dollar transactions which banks can carry out with BDCs at $50,000 per week and set a margin for the banks to sell dollar to currency outlets at not more than 1.5 per cent over the rate at which they bought.

However, a treasurer at a tier one bank, who asked not to be named, argued that unless there was significant accretion to the foreign reserves, the CBN would not be able to sustain its defence of the naira.

He said: “The key to the CBN’s continued defence of the naira depends on the level of the country’s foreign reserves. Given that the price of crude oil, our major export, is still below $50 per barrel, I don’t see the reserves recovering anytime soon. So unless foreign investors agree to return, the naira will continue to depreciate against the dollar.”